Spectrum charge: DoT mulls over methods to avoid revenue loss

New Delhi: Will the DoT take a decision either way on Spectrum Usage Charge (SUC) before the auctions, which are to begin on 23 January? Spectrum usage charge is an annual levy telecom companies have to pay for using spectrum, over and above the price at which they bought airwaves in the first place.

As of now, it is charged in slab rates based on how much spectrum is held by each telco and the payout increases as quantum of spectrum increases with each telecom service provider.

Fixing spectrum charge. Reuters

Senior officials of the Department of Telecom (DoT) did not commit to the auction deadline in a pre-bid conference today. DoT's Member (Finance) Annie Moraes said in reply to numerous questions from telcos that work was on within the department to settle this contentious issue and the finance ministry was being consulted but she declined to confirm if the process will be over before auctions begin.

Media reports have earlier suggested that DoT may not be in favour charging all telcos this levy at a flat rate since it apprehends revenue loss of over Rs 2,500 crore in a 10 year period. And in a letter to the finance ministry earlier this week, telecom secretary MF Farooqui had sought the appointment of an officer from the Department of Expenditure who will be consulted by the DoT before arriving at any decision. In this letter too, the secretary had stressed that "revenue neutrality" needs to be maintained, meaning the government cannot lose revenue because of making SUC a flat rate.

Earlier, telecom regulator Trai had suggested that highest slab of SUC which is at 5 percent of Adjusted Gross Revenue of a telco now, should be reduced to 3 percent of AGR and this 3 percent rate should be uniformly applicable to all spectrum that has been obtained by a telco through auctions. Till now, spectrum usage has been charged at different slab rates.

The reluctance of the DoT to commit itself to a decision on the SUC imbroglio before the auctions could put the entire auction process in jeopardy. Unless the SUC rate is known, it would be difficult for potential bidders to make any meaningful decision regarding quantum of spectrum and which service areas to bid for.

In its submissions on the issue, GSM lobby group Cellular Operators Association of India has said that making SUC a flat charge will not reduce revenues to the government but enhance these instead. COAI said that the current regime of different slab rates for SUC penalises large operators and discourages them for purchasing more spectrum because then the levy also increases. So what COAI is saying is that lower SUC will means operators have the ability to participate aggressively in upcoming auctions.